textbook summary CHAPTER 4 national ownership
Unit 1 Summary
National Ownership: Real Property Characteristics & Rights
Land
Includes minerals beneath the earth’s surface, water on or below the earth’s surface, and the air above the surface. Includes all natural things permanently attached to the earth.
A parcel of land is a portion of land delineated by boundaries.
· Physical characteristics: immobility, indestructibility, and heterogeneity.
· Economic characteristics of land:
1. Demand
2. Utility
3. Scarcity
4. Transferability
5. Situs Real Estate
Includes land and all man-made structures that are “permanently” attached to the land (improvements).
Textbook Summary
The government can impose restrictions on private ownership rights and take private property away altogether.
Property
Property is not only the item that is owned but also a set of rights to the item enjoyed by the owner.
· Real property – ownership of real estate and the bundle of rights associated with owning the real estate.
Personal property – ownership of anything that is not real estate, and the rights associated with owning the personal property item (chattels or personalty).
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· Tangible property – physical, visible, and material. Intangible property – abstract, having no physical existence in itself, other than as evidence of one’s ownership interest.
· Types and uses of real property: residential, industrial, commercial and agricultural property.
· Special purpose real estate has a unique use for the persons who own and use it, such as churches, hospitals, schools and government buildings – public open space and recreational areas.
· Bundle of rights: to possess, use, transfer, encumber and exclude.
· Land can be laterally severed into surface, air and subsurface rights.
· Water rights – doctrine of prior appropriation requires that property owners obtain permits for the use of water.
o Littoral rights concern properties that border bodies of water that are not moving.
o Riparian rights concern properties that border moving water such as streams and rivers.
· Land gain or loss due to the action of water: accretion, erosion, avulsion, reliction and
alluvion.
Real vs. Personal Property
Fixture is a personal property item that has been converted to real property by attachment to real estate. Differentiation criteria:
· Intention
· Adaptation
· Functionality
· Relationship of parties
· Sale or lease contract provisions
· Trade fixtures
· Emblements
· Conversion – severance/affixing
Regulation of real property interests
Under the allodial system, individuals are entitled to own property without proprietary control by the government.
· Federal regulation – primarily concerned with broad standards of real property usage, natural disaster, land description, and discrimination.
· State regulation – primary regulatory entities of the real estate business. State governments establish real estate license laws and qualifications.
· Local regulation – county and local government regulation focus on land use control, control of improvements, and taxation. They have the power to levy real estate taxes.
· Judicial regulation – exerts an influence on real estate ownership and use through decisions based on case law and common law, as distinguished from statutory law.
Unit 2 Summary
National Ownership: Legal Descriptions
A legal description of real property is one which accurately locates and identifies the boundaries of the subject parcel to a degree acceptable by courts of law in the state where the property is located.
A legal description is required for:
· Public recording
· Creating a valid deed of conveyance or lease
· Completing mortgage documents
· Executing and recording other legal documents
Accepted methods
Metes and bounds
Identifies the boundaries of a parcel of real estate using reference points, distances, and angles.
The description always identifies an enclosed area by starting at and returning to the origination point (pob).
The rectangular survey system
It is inadequate as a method of legal description for irregular shapes. The full description has to include a metes and bounds or lot and block description.
The principal meridian is the single designated meridian for identifying townships in the principal meridian’s geographical “jurisdiction.” every 24 miles east and west of a principal meridian is a guide meridian.
The base parallel is the designated line for identifying townships. Every 24 miles north and south of a base parallel is a correction line.
The 24-by-24-mile square created by the intersection of guide meridians and standard parallels is called a check or quadrangle.
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The north-south area between consecutive meridians is called a range.
· Identified by an “r” for range, a number representing its ordinal position from the principal meridian, and a”w” representing that it is west of the principal meridian.
The east-west area between two parallels is called a tier or township strip.
· Identified by a “t” for the tier, a number representing its ordinal position from the base line, and an “n” or “s” for north or south of the base line.
Individual townships are identified by their tier and range identification taken together, with the tier designation named first.
The rectangular survey system divides a township into thirty-six squares called sections. Each side of a section is one mile in length.
· The description proceeds from the smallest unit to the largest.
Calculating the acreage of a parcel:
· Multiply the denominators of the fractional descriptions together.
· Divide 640 by the resulting number.
Recorded plat method
Used to describe properties in residential, commercial, and industrial subdivisions.
Tracts of land are subdivided into lots. In a large subdivision, lots may be grouped together into
blocks for ease of reference.
The surveyor incorporates the survey data into a plat of survey or subdivision plat map, which must comply with local surveying standards and ordinances.
· The description first presents the property’s lot number or letter, then the block identifier and the subdivision name.
To describe property located above or below the earth’s surface, a surveyor must know the property’s elevation. Standard elevation reference points, datums, have been established throughout the country.
Surveyors have identified local elevation markers, benchmarks, to provide reference elevations for nearby properties.
Unit 3 Summary
National Ownership: Interests and Estates
Interests
An interest in real estate is ownership of any combination of the bundle of rights to real property, including the rights to possess, use, transfer, encumber and exclude.
An undivided interest is an owner’s interest in a property in which two or more parties share ownership.
Estates in Land
If a private interest-holder does not have the right to possess, the interest is an encumbrance. If the interest-holder is not private the interest is some form of public interest – police power, eminent domain or escheat.
An estate in land is an interest that includes the right of possession. Depending on the length of time one may enjoy the right to possess the estate, the relationship of the parties owning the estate, and specific interests held in the estate, an estate is a freehold estate or a leasehold estate.
Freehold Estates
A freehold estate of potentially unlimited duration is a fee simple estate: an estate limited to the life of the owner is a life estate.
· Fee simple absolute – perpetual estate that is not conditioned by stipulated or restricted uses. It may be freely passed on to heirs.
· Fee simple defeasible – ownership can continue indefinitely, provided the use of the property conforms to certain stated conditions. The defeasible fee estate is perpetual, provided the usage conforms to stated conditions. The types of fee simple defeasible are determinable and condition subsequent.
A life estate is a freehold estate that is limited in duration to the life of the owner or other named person. Upon the death of the owner, the estate passes to the original owner or another named party.
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Reversionary or remainder interest.
· Conventional life estate – ordinary and pur autre vie.
· Legal life estate – homestead, dower and curtesy, and elective share.
A life tenant has the responsibility to protect the property for the remainderman or the revisionary interest. The life tenant damages or misuses the property, it is known as an act of waste.
Leasehold Estates Estate for years
· Has a definite beginning and ending date.
· Does not require notice to terminate at the end of the term.
· Renewal is not automatic.
Estate from period-to-period
· No definite ending date.
· Either party may terminate tenancy by giving proper notice to the other party.
Estate at will
· Landlord lets you stay without a lease.
· Notice can be given by either party without warning.
· Death of either party immediately terminates tenancy.
Estate at Sufferance
· Holdover tenant is in unlawful possession of the property.
· The landlord must evict a tenant through the courts; cannot lock the tenant out, turn off utilities, or forcibly remove the tenant.
Tenant’s Rights and Obligations
The tenant acquires a leasehold interest. The landlord acquires a leased fee estate.
A tenant has the sole right to occupy and use the premises without interference from outside parties, including the landlord.
The landlord may enter the premises for specified purposes such as inspections, but the interference must be reasonable and limited.
The landlord can do nothing outside of the lease’s express provisions that would impair the tenant’s enjoyment of income deriving from use of the premises.
Conveyance of leased property – buyers and creditors must take their respective interests subject to the terms of the lease.
Unit 4 Summary
National Ownership: Forms of Ownership
Ownership
Sole ownership – if a single party owns the fee or life estate, the ownership is a tenancy in severalty.
Co-ownership:
Tenancy in common
1. Two or more owners
2. Identical rights
3. Interests individually owned
4. Electable ownership shares
5. No survivorship
6. No unity of time
7. Partition suit
Joint tenancy
1. Unity of ownership
2. Equal ownership
3. Transfer of interest
4. Survivorship
To create a joint tenancy, all owners must acquire the property at the same time, use the same deed, acquire equal interests, and share in equal rights of possession.
Termination: sale of an interest, bankruptcy, foreclosure or partition suit
Tenancy by the entireties
· Survivorship
· Equal, undivided interest
· No foreclosure for individual debts
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· Termination: death of either spouse, divorce, mutual agreement or foreclosure.
There is no right of partition: one spouse cannot sell the property without the agreement of the other spouse.
Community property
Defines property rights of legal spouses before, during, and after their marriage, as well as after the death of either spouse.
Separate property belongs to one spouse; community property belongs to both spouses equally.
A spouse may gain an equitable interest in separate property if:
· The value of the separate property increases during the marriage
· Community property funds were used to discharge any debt on the separate property
Tenancy in partnership
The rules of the upa apply to partnership formation, asset ownership, fiduciary duties, dispute resolution, and partnership termination.
Estates in trust
A fee owner (grantor or trustor) transfers legal title to a fiduciary (trustee) who manages the estate for the benefit of the beneficiary. The trust may be created by a deed, will, or trust agreement.
The trustee has fiduciary duties to the trustor and the beneficiary to maintain the condition and value of the property. A living trust allows the trustor, during his or her lifetime, to convey title to a trustee for the benefit of a third party. Established by a written agreement appointing a trustee to manage the trustor’s property.
A testamentary trust is structurally and mechanically the same as a living trust, except that it takes effect only when the trustor dies.
A land trust allows the trustor to convey the fee estate to the trustee and to name himself or herself the beneficiary. Applies only to real property.
· Beneficiary controls property
· Beneficiary controls trustee
· Beneficiary identity not on record
· Limited term
The beneficiary’s interest in a land trust is personal property. This offers advantages in
transferring, encumbering, and probating the beneficiary’s interest.
Condominiums
Combines ownership of a fee simple interest in the airspace within a unit with ownership of an undivided share, and as a tenant in common, of the entire property’s common elements.
Unit owners exclusively possess their apartment space but must share common areas with other owners. Units can be individually encumbered without interference from other unit owners.
Condos are created by executing and recording a condominium declaration and a master deed. The party creating the declaration is referred to as the developer.
An owners’ association to enforce the bylaws and manage the overall property.
Owner responsibilities include maintaining internal systems/property condition and insuring contents of the unit. Unit owners bear the costs of all other property expenses. An annual operating budget totals the expenses and passes them through as assessments to unit owners.
Cooperatives
One owns shares in a cooperative association and acquires an apartment building as its principal asset. Along with this stock, the shareholder acquires a proprietary lease to occupy one of the apartment units.
The corporate entity of the cooperative association is the only party with a real property
interest.
In owning stock and a lease, a co-op unit owner’s interest is personal property that is subject to control by the corporation.
The property must be used in connection with the partnership’s business. Individual rights are not assignable.
The co-op lease is called a proprietary lease because the tenant is an owner (proprietor) of the corporation that owns the property. The lease has no stated or fixed rent.
Debts and financial obligations apply to the property as a whole, not to individual units. Should the corporation fail to meet its obligations, creditors and mortgagees may foreclose on the entire property.
The co-op interest is transferred by assigning both the stock certificates and lease to the buyer.
A developer creates a cooperative by forming the cooperative association, which subsequently buys the cooperative property.
Time-shares
A fee or leasehold interest in a property whose owners or tenants agree to use the property on a periodic, non- overlapping basis.
· Deeded time-share ownership
· Vacation interval option Time-share lease
· The tenant agrees to rent the property on a scheduled basis according to the terms of the lease.
· Allows the leaseholder to use the property year after year without incurring the obligations of paying property taxes or closing costs.
Time-share freehold
· Tenants in common own undivided interests in the property.
· Interval owners must usually waive the right of partition, which would enable an owner to force the sale of the entire property.
Unit 5 Summary
National Ownership: Liens and Encumbrances
An encumbrance is another’s right to use or take possession of a legal owner’s property, or to prevent the legal owner from enjoying the full bundle of rights in the estate. They are not considered estates.
Easements
An easement is an interest in real property that gives the holder the right to use portions of the legal owner’s real property in a defined way. It is a non-possessory interest in property owned by someone else. May be affirmative or negative.
One cannot own an easement over one’s own property.
An easement pertains to a specified physical area within the property boundaries.
Easement appurtenant
Gives a property owner a right of usage to portions of an adjoining property owned by another party.
Rights and obligations automatically transfer with the property upon transfer of the dominant or servient estate, whether mentioned in the deed or not.
The servient and the dominant tenement may use the easement area, if it does not unreasonably obstruct the dominant use.
An easement by necessity is granted because of a circumstance of necessity, most commonly the need for access to a property.
· Must have been a common grantor of the dominant and servient estates.
· Must be a reasonable necessity for the easement, not just for convenience. An easement for light and air should be in writing.
Party wall agreements generally provide for severalty ownership of half of the wall by each owner, or at least some fraction of the width of the wall.
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Easement in gross
A personal right that one party grants to another to use the grantor’s real property. Dominant or servient estates. May be personal or commercial.
Easements may be created by:
· Voluntary action
· Necessity
· Prescriptive operation of law
· Grant or reservation
· Implication
· Government power of eminent domain (condemnation) Easements terminate by:
· Express release of the right by the easement holder
· Purposeful abandonment by the dominant tenement
· Condemnation through eminent domain
Encroachments
An encroachment is the unauthorized, physical intrusion of one owner’s real property into that of another. Cause infringements on the rights of the trespassed owner and may diminish the property’s value, particularly when the property is to be sold.
Licenses
A license is a personal right that a property owner grants to another to use the property for a specific purpose.Licenses are not transferrable and do not attach to the land. They cease on the death of either party, or on the sale of the property.
Deed restrictions
A deed restriction is a limitation imposed on a buyer’s use of a property by stipulation in the deed of conveyance or recorded subdivision plat. They are covenants or conditions.
A developer may place restrictions on all properties within a recorded subdivision plat. Deed restrictions take precedence over zoning ordinances if they are more restrictive.
Liens
If the owner defaults, the lien gives the creditor the right to force the sale of the property to satisfy the debt. A recorded lien effectively reduces the owner’s equity in the property in an amount equal to the lien amount.
Effects on title – if a property is being sold, all liens should be paid in full before the property transfers ownership.
Legal features:
· Does not convey ownership, with one exception.
· Attaches to the property.
· A property may be subject to multiple liens.
· Terminates on payment of the debt and recording of documents.
Voluntary and involuntary – if statutory law imposes an involuntary lien, the lien is a statutory lien. If court action imposes an involuntary lien, the lien is an equitable lien.
A general lien is placed against real and personal property owned by a particular debtor. A specific lien attaches to a single item of real or personal property and does not affect other property owned by the debtor.
Superior liens receive first payment from the proceeds of a foreclosure.
All superior liens take precedence over all junior liens regardless of recording date, but the earlier the recording date of the lien, the higher its priority.
A lienor can change the priority of a junior lien by voluntarily agreeing to subordinate, or lower, the lien’s position in the hierarchy.
All tax liens other than those for ad valorem, assessment, and estate tax are junior liens. They include:
· Federal income tax lien
· State corporate income tax lien
· State intangible tax lien
· State corporation franchise tax lien
Judgment lien
· After paying the debt from the sale proceeds, the debtor may obtain a satisfaction of judgment to clear the title records on other real property that remains unsold.
· The creditor may obtain a writ of execution. The plaintiff creditor may secure a writ of attachment.
· Homestead property and joint tenancy estates are exempt from judgment liens
· They take priority based on the date the judgment is recorded in the county clerk’s office.
Mortgage and trust deed lien
· If a mortgagor defaults, the lender forecloses and the property is put up for sale to satisfy the debt on the mortgage.
· The lien is removed when the property is fully paid for.
A vendor’s lien secures a purchase money mortgage, a seller’s loan to a buyer to finance the sale of a property. A vendee’s lien may be placed by a buyer when the seller has not delivered the title after all other terms of the contract have been satisfied.
A municipality may place a utility lien against a resident’s real property for failure to pay utility bills.
A surety bail bond lien is recorded if the owner can prove that he or she has a net worth of at least twice the amount of the bail. Homestead property cannot be levied against for surety bail bond lien.
If an employer owes back wages to an employee, a wage lien can be set against all real and personal property of the employer.
Mechanic’s lien
Secures the costs of labor, materials, and supplies incurred in the repair or construction of real property improvements.
The priority of a mechanic’s lien dates from the time when the work was begun or completed.
Unit 6 Summary
National Ownership: Title and Title Transfer
Someone who possesses all ownership interests owns legal title to the property. Equitable title is the right to obtain legal title to a property in accordance with a contract between the legal owner and a buyer.
Receiving actual notice means learning something through direct experience or communication. Constructive notice, or legal notice, is knowledge of a fact that a person could have or should have obtained – recordation of ownership documents in public records (title records).
Transfer of title – when the transfer uses a written instrument, the transfer is a conveyance.
· Voluntary alienation – public/private grant. A living owner makes a private grant by means of a deed of conveyance. A private grant that occurs when the owner dies is a transfer by will.
· Involuntary alienation – without the owner’s consent. Occurs by the processes of descent and distribution, escheat, foreclosure, eminent domain, adverse possession, and estoppel.
Deeds of Conveyance
It is necessary for the deed to be delivered to and accepted by the grantee for title to pass.
In states that use the torrens system, title passes only when the deed has been registered on the certificate of title and a transfer certificate has been issued to the new owner.
Validity
· Be delivered and accepted.
· Have a competent grantor and legitimate grantee.
· Be in writing.
· Contain a legal description.
· Contain a granting clause.
· Include consideration.
· Be signed by the grantor.
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· Be acknowledged.
A deed without an acknowledgement tends to endanger one’s claim to a property. Recording the deed gives the public constructive notice of the grantee’s ownership.
Conveyance clauses describe the details of the transfer. Covenant clauses present the grantor’s assurances to the grantee.
Statutory deeds – the covenants are defined in law and do not need to be fully stated in the deed.
· Bargain and sale deed – “i own, but won’t defend.”
· General warranty deed – “i own and will defend.”
· Special warranty deed – “i own and will defend against my acts only.”
· Quitclaim deed – “i may or may not own, and i won’t defend.”
A special-purpose deed is one tailored to the requirements of specific parties, properties, and purposes.
· Personal representative’s deed
· Guardian’s deed
· Sheriff’s deed
· Deed of trust
· Deed in trust
· Master deed
· Partition deed
· Patent deed
· Tax deed
State law usually requires payment of a documentary stamp tax on a conveyance of real property. Exemptions include transfers within the immediate family or between government entities.
Wills
A last will and testament takes effect only after the testator’s death. Amendatory – can be changed at any time during the maker’s lifetime.
Commonly, the testator names an executor, or personal representative, to oversee the settlement of the estate. If a minor is involved, the testator may identify a guardian to handle legal affairs on behalf of the minor.
Types of will
· Witnessed
· Holographic
· Approved
· Nuncupative
Validity
· Testator be of legal age and mentally competent.
· Testator indicate that the will is the “last will and testament”.
· The will be signed.
· Completion of the will be witnessed and signed by the witnesses.
· The will be completed voluntarily, without duress or coercion.
A probate settles a decedent’s estate, whether the person has died testate (having left a valid will) or intestate. Probate of real property occurs under jurisdiction of courts in the state where the property is located, regardless of where the deceased resided.
If the will does not name an executor, the court will appoint an administrator to fulfill this role.
Possible channels of probate deliberation, depending on whether there is a will and heirs: testate proceeding, intestate with heirs, and intestate without heirs.
Involuntary title transfer
Laws of descent – involuntary alienation occurs when a title-holder dies without a valid will. Property that has been abandoned for a statutory period may escheat to the state or county.
A property owner who fails to fulfill loan obligations or pay taxes may lose an estate through
foreclosure.
Various government and public entities can transfer private property to the public sphere by the power of eminent domain.
An adverse possessor is someone who uses another’s property without the knowledge of the owner, or with the knowledge of an owner who fails to take any action over a statutory period of time. To claim legal title, the adverse possessor must:
· Be able to show a claim of right or color of title as reason for the possession.
· Have notorious possession.
· Maintain a consistent claim of hostile possession
· Occupy the property continuously for a statutory period of time.
· In some states, pay taxes.
Estoppel prevents a person from claiming an interest that is inconsistent with the person’s previous statements or acts.
Title Records
Contain a history of every parcel of real estate in the county. Important purposes:
· Public notice
· Buyer protection
· Lienholder protection
Chain of title refers to the succession of property owners of record dating back to the original grant of title from the state to a private party. To remove the clouded title, an owner may need to initiate a suit to quiet title, which clears the title record of any unrecorded claims.
Abstract of title is a written, chronological summary of the property’s title records, and other public records affecting rights and interests in the property.
· Recording system – each state prescribes procedures for recording in public title records: forms, proper execution, acknowledgment, and witnessing.
· The torrens system – title passes only when the conveyance has been duly registered on the title certificate itself. Encumbrances likewise have no legal effect until they are recorded.
Title evidence – to demonstrate marketable title to a buyer, a seller must show that the title is free of:
· Doubts about the identity of the current owner.
· Defects.
· Claims that could affect value.
· Undisclosed or unacceptable encumbrances.
The principal forms of evidence the owner can use to support these assurances:
· Torrens certificate – also acts as a deed of conveyance; title and encumbrances are recorded on the certificate.
· Title insurance policy – indemnifying the policy holder against losses from title defects; the insurer’s “guaranty.”
· Attorney’s opinion of the title abstract – a written statement from an attorney stating an opinion of marketability based on examination of the title abstract.
· Title certificate – a statement of the condition of title as of the date of the certificate.
Unit 7 Summary National Ownership: Foreclosure
Foreclosure is a legal process by which a defaulting borrower loses his interest in the property used as collateral for a mortgage loan or deed of trust. When the process is complete, the lender can sell the property and keep the proceeds to pay off the mortgage and any legal costs.
When a borrower loses a home to foreclosure:
· Any equity which existed is most likely lost.
· The foreclosure becomes public record.
· The borrower’s credit is damaged.
Real estate tax liens are enforced through tax foreclosure sales.
Types of Foreclosure
Judicial foreclosure
Allows the sale of the mortgaged property under the supervision of the court, with the proceeds going first to satisfy the mortgage, then other lien holders, and finally the borrower if any proceeds are left.
Lacking the “power of sale” provision, a lender must file a foreclosure suit and undertake a court proceeding to enforce the lien. The suit asks the court to:
· Terminate the defendant’s interests in the property
· Order the property sold publicly to the highest bidder
· Order the proceeds applied to the debt
If a borrower has failed to meet loan obligations, the lender can accelerate the loan.
A lis pendens gives public notice that the mortgaged property may soon have a judgment issued against it.
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A notice of pendency is only legal notice of a pending action that involves the title to, or possession of, a specific piece of real estate. It could not be used in a suit to recover attorney fees or broker commissions.
The borrower’s right of redemption is the right to reclaim a property that has been foreclosed by paying off amounts owed to creditors.
· The right to redeem property between the time of the default and the foreclosure sale is the equitable right of redemption.
· Statutory periods of up to a year following the sale for the owner of a foreclosed property to redeem the estate are known as statutory right of redemption.
Statutory right of reinstatement is available when the borrower wants to cure the default (bring payments up to date) and reinstate the loan as if the loan had not been accelerated at all.
The court’s writ of execution authorizes an official to seize and sell the foreclosed property.
Judicial sale
· All parties are notified in writing of the sale.
· The sale is advertised in a newspaper with general circulation.
· The property is sold to the highest bidder.
The winning bidder receives a certificate of sale, not a deed. The person holding the certificate will receive a sheriff’s deed only after the sale has been confirmed.
Sale proceeds – order of payment:
1. the cost of the sale
2. any special assessment taxes and general (or ad valorem) taxes
3. the first mortgage (determined by the order of recording)
4. whatever is recorded next
A deficiency judgment enables the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns.
Non-judicial foreclosure
When there is a “power of sale” provision in the mortgage or trust deed document, a non- judicial foreclosure can force the sale of the liened property without a foreclosure suit. The “power of sale” clause in effect enables the mortgagee to order a public sale without court decree.
If the borrower fails to cure the default or use other legal means to stop the sale, the lender may conduct a public auction.
There is no redemption right in non- judicial foreclosure.
If proceeds do not cover the debt, the lender does not obtain a deficiency judgment or lien, but must file a new deficiency suit against the borrower.
Strict foreclosure
A court proceeding that gives the lender title directly instead of giving cash proceeds from a public sale.
· First, the lender must give appropriate notice to the delinquent borrower.
· Next, the lender prepares and records the paperwork.
· After a prescribed period, the lender files suit in court.
· The court orders the borrower to pay the mortgage debt by a certain date.
If the debt is not paid in full by the deadline, the court orders transfer of full legal title to the lender, and the lender gains title with no obligation to sell the property.
Alternatives to Foreclosure
A deed in lieu of foreclosure transfers legal title to the lienholder. A lender may accept a deed in lieu of foreclosure from a borrower the lender deems financially incapable of making mortgage payments.
A short sale occurs when a lender allows a borrower in default on mortgage loan payments to sell the mortgaged property for less money than necessary to satisfy the loan in order to avoid the delay and expense of a foreclosure sale.
Unit 8 Summary
National Ownership: Land Use Control and Regulation
Goals of land use control
· Preservation of property values
· Promotion of the highest and best use of property
· Balance between individual property rights and the public good
· Control of growth to remain within infrastructure capabilities
· Incorporation of community consensus into regulatory and planning activities
Development, administration and implementation of the master plan, which becomes the overall guideline for creating and enforcing zones, building codes, and development requirements.
Planning Objectives
· Amount of growth – sets specific guidelines on how much growth the jurisdiction will allow. Too much growth can overwhelm services and infrastructure.
· Growth patterns – defines what type of growth will occur, and where.
· Accommodating demand – make plans for accommodating expanding or contracting demand for services and infrastructure.
Development and Management
In response to land use objectives, community attitudes, and conclusions drawn from research, the planning personnel formulate their plan.
Planning departments are responsible for long-term implementation of the master plan, creating rules that support policies and administering land use regulation on an everyday basis.
The planning commission is responsible for approving site/subdivision plans and building permits and ruling on zoning issues.
Public Land Use Control
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At the state level, the legislature enacts laws that control and restrict land use. At the local level, county and city governments control land use through the authority known as police power – zoning.
Governments have the right to own real property for public use and welfare. A municipality may annex property adjacent to its existing property. It may force property owners to sell their property through eminent domain.
Zoning
The constitution grants the states the legal authority to regulate, and the states delegate the authority to counties and municipalities through enabling acts.
Zoning ordinance is enacted by the local government to specify land usage for every parcel within the jurisdiction. They implement the master plan by regulating density, land use intensity, aesthetics, and highest and best use.
The zoning ordinances of local planners must be clear in import, apply to all parties equally, and promote health, safety, and welfare of the community in a reasonable manner.
Local governments enforce zoning ordinances by issuing building permits to those who want to improve, repair, or refurbish a property.
Types of Zones
· Residential zoning regulates density and values and aesthetics. Some areas adopt buffer zones.
· Commercial zoning regulates the location of office and retail land usage – density of usage.
· Industrial zoning regulates intensity of usage, type of industrial activity and environmental consequences.
· Agricultural zoning restricts land use to farming, ranching, and other agricultural enterprises.
· Public zoning restricts land use to public services and recreation.
· Planned unit development zoning restricts use to development of whole tracts that are designed to use space efficiently and maximize open space.
Zoning board of adjustment
If the board rejects an appeal, the party may appeal the ruling further in a court of law.
· A nonconforming use clearly differs from current zoning. An illegal nonconforming
use is one that conflicts with ordinances that were in place before the use commenced.
· A zoning variance allows a use that differs from the applicable ordinance for a variety of
justifiable reasons.
· A special exception grant authorizes a use that is not consistent with the zoning ordinance in a literal sense, yet is clearly beneficial or essential to the public welfare and does not materially impair other uses in the zone.
· Amendment – a property owner may petition the zoning board for an outright change in the zoning of a particular property. Often involves public hearings.
Subdivision Regulation
The developer submits a plat of subdivision containing surveyed plat maps and comprehensive building specifications.
· In counties that are densely populated, the county must approve subdivisions
– extraterritorial jurisdiction.
· Concurrency requires the developer to make accommodations concurrently with the development of the project itself, not afterwards.
· Subdivisions must meet FHA requirements to qualify for FHA financing insurance.
Building codes allow the county to protect the public against the hazards of unregulated construction. If the work complies, a certificate of occupancy is issued, clearing the property for occupation and use.
Eminent domain allows a government entity to purchase a fee, leasehold, or easement interest in privately owned real property for the public good and for public use, regardless of the owner’s desire to sell.
· The government agency must demonstrate that the project is necessary, that the property is necessary for the project, and that the location offers the greatest public benefit with the least detriment.
A deed restriction places limits on the use of the property. A quitclaim deed can terminate a private deed restriction.
A deed condition may restrict certain uses of a property. If a condition is violated, ownership reverts to the grantor. These conditions create a defeasible fee estate.
The declaration of a subdivision, planned unit development, condominium, and commercial or industrial park contains private use restrictions. An injunction prevents the owner from using a property in a way that is contrary to the recorded
Restrictive covenants are promises by those who purchase property in the subdivision to limit the use of their property to comply with the requirements of the restrictive covenants – negative easements.
Restrictions must be reasonable, and they must benefit all property owners alike.
If the subdivision is in a zoned area, restrictive covenants have priority over the zoning ordinance, but won’t be enforced if they go against public law.
Restrictive covenants may be terminated if the specified time period of the covenant expires or the property owners vote to end the restrictions.
The doctrine of laches states that if a property owner is lax in protecting his or her rights, the property owner may lose those rights.
Environmental Controls
Air quality – significant threats:
· Asbestos
· Carbon monoxide
· Formaldehyde
· Lead
· Mold
· Radon
Soil and water quality – problems subject to controls:
· Dioxins
· Lead and mercury
· MTBE, methyl tertiary butyl ether
· PCB, polychlorinated biphenyl
· Underground storage tanks (USTs)
· Wetlands
Other ambient and natural conditions:
· Electromagnetic fields (EMTs)
· Noise
· Earthquake and flood hazards
For their own protection, licensees should:
· Be aware of potential hazards.
· Disclose known material facts.
· Distribute the HUD booklet.
· Know where to seek professional help.
Unit 9 Summary
National Ownership: Real Property Taxation
There are no federal taxes on real property.
States may legally levy taxes on real property, but most delegate this power to counties, cities, townships and local taxing districts.
Counties, cities and municipalities, townships levy taxes on real property to raise funds for providing local services. The purpose of taxation is to raise funds to pay for municipal services. Property taxes are based on the assessed value of the property.
Assessing units and special assessment districts levy taxes on real property.
County and local governments establish tax districts to collect funds for providing specific services.
· Property tax revenue is predictable.
· The taxes are hard to avoid.
County and local governments establish tax districts to collect funds for providing specific services. Special tax districts cease to exist once the costs of the specific project have been paid for, unlike permanent tax districts.
Valuation and Assessment
Assessed value is determined according to state law, usually by a county or township assessor or appraiser. Ad valorem taxes are paid annually.
The role of the assessor in the taxing process is limited to making the valuation and notifying the owner of the assessed value; other tax officials determine the tax rate and the tax levy.
Level of assessment – the value may be adjusted by multiplying by a uniform percentage for the municipality. The jurisdiction may establish equalization factors to level out the unevenness of valuations.
Properties are reassessed for tax purposes on a regular schedule that is established by statute. Can be done “off schedule” when a property owner makes improvements to the property.
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The international association of assessing officers (IAAO) guidelines state that assessors should conduct a physical review of properties at least every four to six years, including an on-site verification of property characteristics.
An owner who is dissatisfied with the actions of the appeals or review board can take the protest to court.
Exempt Properties
Real property tax exemptions criteria:
· The use to which the property is put.
· The owner’s ability to pay taxes.
· The desire of the state and local governments to encourage certain economic or social activities.
A property owner generally qualifies for a homestead exemption if he is head of a family or resides on the property for a required length of time.
The non-homestead class includes commercial, industrial and utility properties and some vacant land.
Other exemptions: government-owned properties and properties owned by non-profit organizations.
Tax Derivation
The tax base of an area is the total of the appraised or assessed values of all real property within the area’s boundaries, excluding partially or totally exempt properties: tax base = assessed values – exemptions.
The tax rate determines how much of a tax levy the tax base will receive.
The tax levy is derived every year, since budget requirements and revenue tallies are performed on an annual cycle.
A mill is one one-thousandth of a dollar ($.001).
Tax rate limitations – taxing bodies are forced to limit their budget requirements, unless there has been a sufficient increase in tax base to produce the required funds without raising the millage rate.
Tax Billing and Collection
Each property owner’s tax bill is determined by multiplying the tax rate for each taxing district times the taxable value of the property.
Taxable value is the assessed value after all exemptions and adjustments have been taken into account.
Payment deadlines are usually set by law and differ from region to region. Taxes are paid in arrears at the end of the tax period.
Special Assessments
A special assessment is a tax levied against specific properties that will benefit from a public improvement. The assessment creates a specific lien against the property until it is paid.
Tax Lien Enforcement
A tax lien is a lien against real property for the failure to pay property taxes. When title to a property is transferred, the tax lien should be paid first.
An in rem proceeding is one that is directed against a thing, rather than against a person.
The buyer of a tax certificate agrees to pay the taxes due. After a period of time specified by law, the holder of the tax certificate on a property may then apply for a tax deed.
A tax sale is frequently some type of auction usually conducted by the sheriff. If the tax has not already been paid through the tax certificate process, the buyer of the property must pay the taxes due.
During the redemption period, the defaulted taxpayer has the right to buy back the property and reclaim title.
If the taxpayer can redeem the property by paying the delinquent taxes and any other charges before the tax sale occurs, this right is known as an equitable right of redemption. If the
taxpayer redeems the property after the tax sale, this right is known as a statutory right of redemption.
Unit 10 Summary
National Ownership: General Contract Law
A valid contract is one that is legally enforceable by virtue of meeting certain requirements of contract law.
Legal Status
· Valid – enforceable within a statutory time period.
· Valid but unenforceable – some contracts are enforceable only if they are in writing.
· Void – does not meet the tests for validity, and therefore is no contract at all.
· Voidable – subject to rescission by a party to the contract who is deemed to have acted under some kind of disability.
Criteria
· Competent parties – capacity to contract is determined by legal age, mental competency, and legitimate authority.
· Mutual consent requires that a contract involves a clear and definite offer and an intentional, unqualified acceptance of the offer.
· Valuable consideration as compensation for performance by the other party. Good consideration is something of questionable value.
· Legal purpose – the content, promise, or intent of a contract must be lawful.
· Voluntary, good faith act – contract is voidable if one party acted under duress, coercion, fraud, or misrepresentation.
A contract that conveys an interest in real estate must be in writing and contain a legal description of the property and be signed by one or more of the parties.
Enforcement Limitations
· The statute of limitations restricts the time period for which an injured party in a contract has the right to rescind or disaffirm the contract.
· The statute of frauds requires that certain contracts must be in writing to be enforceable. It concerns the enforceability of a contract, not its validity.
· The uniform electronic transactions act makes it legal in many states to use electronic signatures in electronic transactions.
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Contract Creation
An offer expresses the offeror’s intention to enter into a contract with an offeree to perform the terms of the agreement in exchange for the offeree’s performance.
For an acceptance to be valid, the offeree must manifestly and unequivocally accept all terms of the offer without change, and so indicate by signing the offer, preferably with a date of signing.
By changing any of the terms of an offer, the offeree creates a counteroffer, and the original offer is void. The revocation extinguishes the offer and the offeree’s right to accept it.
Termination of offer by acceptance, rejection, revocation, lapse of time, counteroffer or death.
A real estate contract that is not a personal contract for services can be assigned to another party unless the terms of the agreement specifically prohibit assignment.
Brokers and agents may not complete leases, mortgages, contracts for deed, or promissory notes to which they are not a party.
Classifications of Contracts
· An express contract is one in which all the terms and covenants of the agreement have been manifestly stated and agreed to by all parties. An implied contract is an unstated or unintentional agreement that may be deemed to exist when the actions of any of the parties suggest the existence of an agreement.
· A bilateral contract is one in which both parties promise to perform their respective parts of an agreement in exchange for performance by the other party. In a unilateral contract, only one party promises to do something, provided the other party does something.
· An executed contract is one that has been fully performed and fulfilled: neither party bears any further obligation. An executory contract is one in which performance is yet to be completed.
· An unconscionable contract is one that unduly favors the party with superior bargaining power.
· An adhesion contract is one dictated by the party who has the greater bargaining advantage.
· An aleatory contract is one whose effects are triggered by the occurrence of a chance event.
Contract Termination
1. Performance
2. Infeasibility
3. Mutual agreement
4. Cooling-period rescission
5. Revocation
6. Abandonment
7. Lapse of time
8. Invalidity of contract
9. Operation of law
A breach of contract is a failure to perform according to the terms of the agreement. The damaged party may elect legal remedies such as rescission, forfeiture or suit for damages/specific performance.
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Unit 11 Summary National Ownership: Construction
Laws and Regulations
If a property is built with any money from a federal program, the property must be approved in advance and be inspected by the proper agency as the construction progresses.
· HUD’s minimum property standards provide minimum standards for HUD regulated single-family and multi-family construction projects.
· The interstate land sale full disclosure act guards consumers against fraud by requiring developers to disclose relevant information about subdivisions before purchase.
· The national electric code provides standards for wiring and electrical equipment.
· The Americans with disabilities act ensures that accessibility standards will be observed in certain types of residential construction.
Cities, counties, and local governments have the power to impose their own land use regulations and building codes. These laws may not be in opposition to any federal or state laws.
Most legislation is overseen by EPA – National Environmental Policy Act of 1969.
Site requirements
Requirements for wells concern placement – for access, freedom from flooding, away from sources of contamination.
Requirements for septic systems concern proper design, construction, and maintenance, suitable soil, adequate land area.
Foundations
The footing holds the entire weight of the building.
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If the area between the foundation walls has been excavated deeply enough to provide head room, then a basement has been created. If the foundation area is only partially excavated, then what results is a crawl space.
The foundation wall of a basement and floors that come in contact with soil must be treated for ground and surface water seepage by the placement of a vapor barrier.
When the ground at a building site is level, the developer can use a slab-on-grade foundation. The slab is a flat concrete pad poured directly on the ground.
Framing
Wood framing refers to the framework of the structure. The pieces of wood used are studs. Studs used to frame the roofing system are rafters.
· In platform-frame construction, first floor joists are completely covered with sub-flooring to form a platform upon which exterior walls and interior partitions are erected.
· In balloon-frame construction, exterior wall studs continue through the first and second stories.
· In post and beam construction, wider beams are spaced up to eight feet apart.
Floor framing consists of a system of sills, girders, joists or floor trusses and sub flooring that provides support for floor loads and gives lateral support to exterior walls.
A sill plate is a wooden support member that is laid on top of and bolted to the foundation wall.
Wnen two or more Joists are required to cover tne span, support is provided for tne joist ends by girders or support beams. Sometimes tne main floor beam of tne structure is supported by /ally columns.
Roof construction must be strong enough to withstand anticipated snow and wind loads.
Carpenters build rafters to frame the pitch or slope of the roof. The roof ridge beam is the highest part of the frame and forms the top line of the roof.
The roof sheathing is made up of wood structural panels or 1-inch board lumber which provides a solid base for roof coverings.
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Wall framing refers to both the exterior and interior walls. Walls that support the ceiling and the roof are called bearing walls.
Headers are required at window and door openings to carry vertical loads across the opening.
Finishing Roof finishing
· The overhangs are called eaves. The contractor installs a thin impermeable material called flashing to prevent water penetration and/or provide water drainage between the roof and the walls.
· The term fascia is used to describe the horizontal “fascia board” which caps the end of rafters outside the building. The finished surface below the fascia and rafters is called the soffit.
Wall finishing
· The high resistance of wood frame construction to hurricane, earthquake and other natural forces is provided when wood sheathing is nailed to the outside edges of exterior wall studs, plates, and headers.
· For interior wall finishing, contractors use plasterboard, wallboard, drywall, or
sheetrock.
Insulation
The r-value is the degree or resistance to the heat transfer. Categories of insulation include loose fill, batts, and blankets, rigid board, spray and reflective.
Major Mechanical Systems: HVAC
Ventilation is the intentional movement of air from outside a building to the inside.
Ventilation air is that air used for providing acceptable indoor air quality.
Residential heating systems typically fall into one of these categories: hot water, steam, forced air or electric.
Air conditioning systems are combined with forced-air heating units to deliver heat through the ductwork system in cold seasons and cool, dehumidified air for air conditioning through the same ducts during warm seasons.
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The most common type of heat pump is the air-source. Higher efficiencies are achieved with geothermal heat pumps.
A British thermal unit (btu) is the amount of heat energy needed to raise the temperature of one pound of water by one degree Farenheit.
Major Mechanical Systems: Plumbing
Hot water heaters – gas, electric, tankless or solar.
Types of pipe
1. Cast iron
2. Galvanized
3. Copper
4. PVC
5. Brass
6. PEX
Pipes that are too small prevent the pressure from moving the water to the fixtures. Pressure regulating valves can reduce and maintain the correct water pressure within the system, while a booster pump can increase the pressure if needed.
The vent system allows gases and odors to circulate up through the system and escape into the outside air.
Major Mechanical Systems: Electrical
Voltage is a measure of how much pressure the electrons in a circuit are under.
Amperage (in watts) is a measure of a number of electrons moving through the circuit.
A fuse melts and breaks the circuit when the current exceeds a certain value. A circuit breaker stops the flow of electric current in a suddenly overloaded circuit.
Wiring materials
· Aluminum or copper
· BX cable
· Romex cable
· Conduit
· Greenfield conductors
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